Professional Documents
Culture Documents
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They have left you with the information below after the first interview.
The Pedro family personal and financial information
Income
salary & wages *
(excludes employer SG
contribution)
John
Georgina
$320,000
$155,000
Employer superannuation
(retail funds)
Home loan @5.85% variable
Income requirement **
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*** The share portfolio was recently acquired by John after he received a cash
inheritance of $300,000. He invested $75,000 in each of the following shares
Westfarmers, Woolworths, CBA and Westpac.
.
You need to clearly address the following issues:
Their goals, objectives, needs, and concerns and whether they can achieve their
objectives including their retirement objectives and how (attempt to present
them with more than one option where applicable).
They also ask you to address and take into account the following specific
issues:
o
John would like to retire once he reaches age 65. Georgina is planning to
retire when she reaches age 60. However, they are happy to postpone
retirement for a few more years if this would help them achieve a more
comfortable retirement as John is happy to scale down his work load and
stay working on a consultancy basis for a few more years. They think that
they need an after tax income of $75,000 in todays dollars during their
retirement as by then the mortgages will be paid out (assume that this
income can be produced tax free at retirement).
John and Georgina would like to pay off their home loan as soon as
possible.
They are happy to consider the concept of borrowing to invest if they feel it
can help them achieve their retirement aim.
John and Georgina would like to help their son William get back on his feet
again, however, they acknowledge William is not very good with money.
John and Georgina would also like to assist their daughter Tina in providing
for their grandchildrens high school education. They would like to provide
$15,000 pa per child for the high school years.
Georgina would like to do some renovations on the house after they have
both retired. The expected cost is approximately $200,000 in todays
dollars.
John and Georgina would also like to go on a trip around Europe for which
the expected cost is approximately $68,000 in todays dollars.
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They would also like to replace their car for which the expected cost is
approximately $120,000 in todays dollars.
John has asked you about the ability of starting his own SMSF as some of
his work colleagues have done just that. At present John and Georginas
superannuation contribution goes to an employer nominated retail fund.
John has heard from a colleague at work that the SMSF can borrow to
purchase a property under an instalment warrant type arrangement. John
and Georgina would like to know more about that and the possibility to use
such a facility through a SMSF to buy an apartment for their son William to
live in and also possibly an office space for John to run his consultancy
business if and when he decides to retire.
John & Georgina heard from one of their friends about a strategy that was
referred to as "using salary sacrifice to superannuation to maximise
retirement income". They are questioning whether such a strategy would be
suitable to either and or both of them (provide the relevant calculation/s with
your explanation).
John would like to get some advice on his share portfolio has recently
purchased after he received some tips from an old friend of his who invests
regularly in the market. Advise John if his share portfolio is well diversified
and explain why or why not. Also elaborate on what can be done to make
the share portfolio more diversified. Provide John with a clear illustration/
justification.
John and Georgina would like to get some advice on their possible eligibility
to obtain the age pension once they are retired. Provide them with a clear
explanation of the reason why or why not. Explain any other social security
issues, if any.
John and Georgina would like to help William; however, they are concerned
about him particularly in light of his recent bankruptcy.
John and Georgina would also like to assist in providing for their
grandchildrens high school education. They would like to provide $15,000
pa per child for the high school years.
John and Georgina would like to get some advice on the different types of
pensions they can start with their superannuation savings.
John and Georgina would like to ensure they have adequate general and
personal insurance.
John and Georgina would like you to consider their estate planning needs.
The term deposit maturing soon and they would like some advice on what
they should be doing and possible options available for them.
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John and Georgina have both indicated they wouldnt mind taking some
calculated risks to help them achieve their objectives.
You are required, to assist John and Georgina identifying their
appropriate investment risk profile based on John and Georginas goals,
objectives, risk concerns, time horizon and liquidity needs.
Cash flow and asset projections (include projections of cash flows for John and
Georgina, presenting both pre-tax and post-tax results).
Provide assumptions used and justifications (cost, risk, suitability, etc.) when
required.
Your task now is to prepare a complete Statement of Advice (SOA) for John and
Georgina. The information provided in the client scenario is to be used in preparing
your calculations and advice. As the assignment is to be a SOA for clients, it should be
in a suitable format and use appropriate language. Clarity and conciseness are
important but full explanations are required.
Your SOA should clearly show the structure you recommend for their portfolio,
how they can achieve their goals and where the capital and income will be
sourced. Your SOA should address a long-term plan to provide income and
should include projections.
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